Construction is a growing industry at the moment. It’s a lucrative investment opportunity for anyone looking to take on risk and put in a large amount of effort required to start. But, to truly reap the rewards of owning your business, you need to create that solid foundation. And to help you, here is a list of things you need to know, evaluate and determine when starting your own construction company.
Define the Company and Its Goals
Knowing what you want is one of the essential steps to set up your first company. Spending some time thinking about what kind of construction company you want to run, reassessing that idea, and confirming it will help you take that initial first steps. In doing so, you will have a clearly marked goal that helps you focus your efforts on achieving it.
Determine Its Viability
To find out exactly which area of the construction industry is aligned best with your vision, start the process with a SWOT analysis. It evaluates your strengths, weaknesses, opportunities, and threats. After you get the results, you will have a better understanding of the skills, experience and the process you need to adopt in order to know where you want to go and how to get there.
Conduct Market Research
Conducting market research is crucial for up-and-coming construction company owners. According to the US Small Business Administration, the residential building construction industry was the fastest growing industry in recent years. That’s why determining the state of the market in your area, the number of competitors, and the demand for services and products can mean the difference between success and failure.
Determine the Target Market
Similar to market research, identifying the right consumer lets you know who will be buying your services. It might not necessarily be the end-user, but rather organizations, development groups, banks, or general contractors who require your services to be able to resell properties to third parties. They are potentially your target audience, and you need to identify them to market your services directly and successfully.
Find Funding for the Company
Construction companies require a lot of initial capital investment. At first, you might need to rent heavy equipment and pay for materials upon project completion to cut costs. On the other hand, it might be better for you to create a solid financial plan and forecast to access funding from institutions like banks and other money lenders. In any case, funding is necessary to get you started.
Get Supplies and Equipment
It’s really hard getting into the construction without sufficient supplies and equipment. As mentioned, you should consider renting heavy construction machines, especially if you don’t have a niche determined yet. However, it’s always good to have high-quality portable scaffolding and hand tools which are one-time investments applied across the industry. And as for materials, it’s best to determine everything you need after you receive the outline of the project from the client.
Apply for Licenses and Permits
Construction is a very regulated industry. It is therefore essential to keep up with codes, laws, health and safety practices mandated by the Occupational Safety and Health Administration (OSHA), insurance, taxing and other regulations. All these things are different depending on your location, but for the most part, the legal requirements you should be aware of are:
- Local building codes, such as the International Building Code or other alternatives;
- Regulations and limits based on the class of the construction company;
- Safety and protection, such as Personal Protective Equipment requirements directed by OSHA;
- Licensing and insurance depending on your industry and location;
- Taxing requirements at the federal and state level imposed at various areas of the industry.
Choose the Location
Because of licenses and permits, choosing a location is extremely important when starting a construction business. It might seem logical to open the company at the location of your target market, but you might be able to cut some serious costs if you move across state lines. Essentially, your clients can remain in one state while you choose a state with the most lenient regulations that improve your bottom line.
After you have decided on the direction your construction company will take, it’s time to put it all together and create a step-by-step business plan. Think of it as a checklist you need to complete to open up your business. Once you have put it all on paper, take action and move down the list until you have everything you need to get your first client.
Featured Image by Syaibatul Hamdi from Pixabay